Monte dei Paschi says ECB loan audit ended, may affect its solvency

Reuters Staff

2 Min Read

A logo of Monte dei Paschi di Siena bank is seen on the ground in Siena, Italy, November 5, 2014. REUTERS/Giampiero Sposito/File Photo

MILAN (Reuters) - The European Central Bank completed in February a nine-month inspection of the loan book of Monte dei Paschi di Siena (BMPS.MI) and will take its outcome into account when assessing the Italian bank’s solvency, the lender said.

Monte dei Paschi must fill an 8.8 billion euro ($9.5 billion) capital gap after failing to raise 5 billion euros in a share sale last year. The Tuscan bank has requested state support but it must be deemed solvent and have its restructuring plan approved by European authorities to tap public money.

In documents published on its website late on Monday ahead of an April 12 shareholder meeting, Monte dei Paschi said the ECB’s inspection that started in May 2016 had looked at how loans were classed, provision levels and the value of collateral as of the end of 2015.

Monte dei Paschi has the highest proportion of problem loans among Italian banks in relation to its capital and last year’s failed capital raising was aimed at covering losses from the planned disposal of 28 billion euro in bad debts.

The bank said the ECB had not yet communicated results of the inspection.

“The final outcome of the on-site inspection will be taken into account when assessing the bank’s solvency,” Monte dei Paschi said.

The possible impact on the bank’s solvency is an element of “significant uncertainty” regarding its ability to continue to operate, the bank said.

Other risk factors are obtaining the necessary authorizations for a state recapitalization and the ability to carry out its restructuring plan, the bank said.